What is the difference between the acquisition value and the appraisal value of a property?

Are you going to buy a house through financing and want support to explain the whole process and concepts to you? "Poupança no Minuto" can do that for you, at no cost, guiding you to the best credit proposal for you! But first read about the difference between the acquisition value and the appraisal value.

What is the purchase value and the appraisal value of a property?  

In buying and selling a house, you may come across various concepts regarding the property value in the transaction. But those you must (really) know, as they will impact the down payment you have to give in the process if you resort to a home loan, are the acquisition value and the appraisal value.

In general, the acquisition value corresponds to the amount set by the owner of a property to sell it, and the appraisal value is the amount for which the property is evaluated by specific experts.

The property valuation aims to determine the real value of a property for housing credit purposes. It allows the bank to understand the value of the property and evaluate the loan amount to be granted. It can be done in two situations - when contracting a new housing credit or when transferring the credit to another bank (since if the property was purchased 10 years ago, it will not have the same valuation value now).

Note that the ratio between the value financed by the bank and the value of the property is called Loan-to-value (LTV), and the ratio between the financing value and the construction value of a real estate project is defined as Loan-to-cost (LTC). These two values ​​are detailed in the European Standardized Information Sheet (FINE).

What is the impact of the difference between the acquisition and evaluation value on housing credit?  

But what you should pay attention to, considering the difference between these two values, is that, at the time of the bank financing (at most, 90% in the case of credit for permanent own housing), it will lend the percentage corresponding to the lowest value between the two - acquisition or evaluation.  

What it means is that the value by which the property will be evaluated will have a direct impact (which can be negative or positive) on the amount you have to make available initially.

Let's understand better through an example: imagine you are buying a property with an acquisition value of 300,000 euros, but the property is then appraised for a value of 285,000 euros.

If initially the bank proposed to lend 90% for housing credit for its own permanent purpose, it means it would lend 270,000 euros and would have to have an initial own capital available of 30,000 euros.

However, if the property was later appraised at 285,000 euros, because it is the lower value, the bank will only lend 90% of this amount, which is 256,500 euros. However, note that the acquisition value will remain the same for the owner. This means that the initial equity that must be available in this case for the down payment is 43,500 euros (plus 13,500 euros compared to the previous situation).  

However, bear in mind that the reverse can also occur. The appraiser could evaluate the property at 310,000 euros, and then the bank would continue lending 90% of the lower value, in this case, the purchase value - 300,000 euros.

This demonstrates the importance of understanding the difference between these two concepts before diving into a mortgage credit process.

It is also extremely important to have access to the best services, especially a good property evaluation service because the more specialized, detailed, and thorough it is, the more guarantee there is that it will be a realistic report.

To this end, you must have the support of experienced professionals in the market, such as the credit intermediaries of Poupança no Minuto. For free, the agents help ensure all communication with financial institutions, handle all bureaucracy, and find the best services and the best credit proposal for you!